Im now a founder having previously worked in a startup as an early employee and in a senior role as it expanded.
As with many people here I had little faith in options. And now having more visibility as to how share structures evolve this has lessened even further. Despite best intentions as things progress the value of options and non-founder, non-VC held shares frequently take a whack. There is also a whole host of problems including liquidity and tax issues.
Ive have however seen some traditional companies structure early employee incentive in a completely different manor. They leave the cap table for investors and founders and instead arrange either a bonus or a profit sharing scheme that does well for these employees.
This typically works on trust, but Im sure there is a way to formalise it. Either through employee contracts which have a defined profit sharing goals (in a similar manor to a sales persons targets). Or even perhaps through contracts which ensure cash bonuses based on acquisition value are full-filled.
There must be ways to orchestrate it without effecting the finance of the company or complicating acquisition too much. For example, creating a pool of "tickets" associated with future revenue/profit/exit sharing commitments that can then be vested in a manor similar to options.
As with many people here I had little faith in options. And now having more visibility as to how share structures evolve this has lessened even further. Despite best intentions as things progress the value of options and non-founder, non-VC held shares frequently take a whack. There is also a whole host of problems including liquidity and tax issues.
Ive have however seen some traditional companies structure early employee incentive in a completely different manor. They leave the cap table for investors and founders and instead arrange either a bonus or a profit sharing scheme that does well for these employees.
This typically works on trust, but Im sure there is a way to formalise it. Either through employee contracts which have a defined profit sharing goals (in a similar manor to a sales persons targets). Or even perhaps through contracts which ensure cash bonuses based on acquisition value are full-filled.
There must be ways to orchestrate it without effecting the finance of the company or complicating acquisition too much. For example, creating a pool of "tickets" associated with future revenue/profit/exit sharing commitments that can then be vested in a manor similar to options.